Kingdom Capital Advisors Exits Warrior Met Coal (HCC) for AI Stocks: A Strategic Shift to Growth Amid Macro Tailwinds

The investment landscape is in flux as macroeconomic forces and technological advancements redefine risk and reward. Kingdom Capital Advisors' recent decision to divest from Warrior Met Coal (NYSE: HCC) and reallocate capital to under-the-radar AI plays underscores a broader strategic shift: capital is fleeing cyclical commodities for secular growth in artificial intelligence. This move reflects a calculated response to shifting market dynamics, including the fading tailwinds for metallurgical coal and the surging potential of AI-driven solutions amid Trump-era tariff reversals and onshoring trends. Below, we dissect the rationale behind this pivot and its implications for investors.

The Case Against Warrior Met Coal (HCC): Valuation Risks and Declining Hedge Fund Interest

Warrior Met Coal's stock has been a textbook example of a declining asset class. Over the past 52 weeks (as of June 2025), HCC's shares have plummeted -27.85%, hitting a 52-week low of $46.21 in February 2025. Despite a slight rebound in recent weeks, the stock remains -38.21% below its November 2024 peak of $75.53.

Why the decline?
1. Structural Challenges in the Coal Sector:
- HCC's revenue has stagnated, with USD-denominated sales inching up just 0.8% over two quarters, while rupee-denominated revenue fell 12.8% due to currency headwinds.
- Net profit in USD terms has collapsed by 251.4% over five quarters, signaling margin pressures from volatile coal prices and weak steel demand.

1. Declining Institutional Sentiment:
2. Hedge fund ownership has dwindled, with the stock's institutional “Hold/Accumulate” rating reflecting skepticism about its near-term prospects.

3. Technical indicators paint a bleak picture: HCC is in a “SELL” position, with resistance at $47.36 and support at $46.65. A recent pivot top on April 24, 2025, further signals bearish momentum.

4. Valuation Overhang:

5. HCC's forward P/E of 17.92 is double its 5-year average of 8.09, while its P/S ratio of 1.85 exceeds its historical norm. These metrics suggest the stock is overvalued relative to its fundamentals, particularly given downward revisions to FY2025 revenue (-11.74%) and EPS (-37.92%).

The Case for AI Stocks: Growth, Tailwinds, and Undervalued Opportunities

Kingdom Capital's pivot to AI isn't arbitrary. The sector is benefiting from three converging macro tailwinds:
1. Tariff Rollbacks and Supply Chain Reconfiguration:
- The U.S. International Trade Court's invalidation of Trump-era tariffs has reduced trade-related risks, freeing capital for AI infrastructure.
- Companies like Palantir (PLTR) and Kinaxis (KXS) are leveraging AI to optimize supply chains, model tariff impacts, and enable onshoring. Palantir's Foundry platform, for instance, helps businesses navigate post-tariff logistics, a demand that's surged as firms prioritize resilience over cost.

1. Onshoring and Reshoring Demand:

2. U.S. firms are accelerating domestic manufacturing to avoid geopolitical risks, creating a boom for AI-driven automation. Wipro (WIT) and FourKites are capitalizing on this trend, using AI to model logistics and duty exposure in real time.

3. Undervalued AI Plays with Upside:

4. While megacaps like NVIDIA (NVDA) dominate headlines, under-the-radar names are cheaper and offer better risk-adjusted returns. For example:
   • Palantir (PLTR) trades at a forward P/S of 2.3x, below its 5-year average, despite its critical role in data analytics for global supply chains.
   • Kinaxis (KXS), with its machine-learning-driven demand planning tools, has a P/S of 4.1x, offering leverage to reshoring trends.

Why Now? The Risk-Return Trade-Off

Investors face a stark choice:
- HCC's Risks:
- Exposure to cyclical commodities with no clear catalyst for recovery.
- A P/E premium despite deteriorating margins and declining analyst estimates.

• AI's Upside:
• Palantir (PLTR): A $76 price target from B. Riley (downgraded from $86 but still bullish) implies 66% upside from current levels.
• Kinaxis (KXS): Analysts project 20%+ revenue growth as reshoring accelerates, with a P/S discount to peers.
• Sector Tailwinds: AI stocks now trade at a 3% premium to fair value, down sharply from a 24% overvaluation earlier in 2025, creating an entry point.

Investment Strategy: Rotate to AI, Avoid Commodity Traps

The writing is on the wall: commodities like metallurgical coal are losing their luster as capital floods into AI's secular growth story. Investors should:
1. Exit HCC: Its valuation and fundamentals justify a sell rating. Focus on cashing in any remaining upside before the stock reverts to its historical mean.
2. Target AI Plays with Onshoring Exposure: Prioritize names like PLTR and KXS, which offer high growth at reasonable valuations.
3. Monitor Technical Signals: AI stocks like PLTR face resistance at $25.50 but have strong support at $22.50—look for pullbacks to buy.

Conclusion: The New Paradigm – AI Over Commodities

Kingdom Capital's exit from HCC and reallocation to AI isn't just a tactical move—it's a bet on the future of global industry. As tariffs fade and onshoring accelerates, AI-driven solutions will dominate the next phase of economic growth. Investors clinging to outdated sectors like metallurgical coal risk missing out on the next wave of innovation. The time to pivot is now.

Final Take: Sell HCC. Buy PLTR and KXS. Let AI power your portfolio's next leg up.

This article is for informational purposes only and should not be considered financial advice. Always conduct your own research or consult a licensed professional before making investment decisions.